Global Climate Financing insufficient to meet Africa’s Adaptation Needs – GCA-CPI report
Twenty-seven of the world’s 40 most climate-vulnerable countries are located in the African continent, where climate disasters are on the rise.
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rom ongoing drought in Southern Africa, to tropical cyclones that impacted 3 million people in Mozambique, Malawi and Zimbabwe in 2019 and a locust outbreak in 2020 that devastated agricultural production, driving food insecurity in East Africa, climate disasters in this continent continue to increase in frequency and intensity.
Paradoxically, Africa is among the world’s lowest carbon emitters.
The COVID-19 crisis plunged Africa into the worst economic recession in more than half a century. The real gross domestic product (GDP) contracted by 2.1% in 2020, as the pandemic pushed an estimated 40 million people into extreme poverty.
To halt the spread of poverty and ensure Africa’s capacity to respond to ongoing and future climate impacts, the African continent urgently needs increased finance flows that meet its adaptation needs.
A new report developed jointly by the Climate Policy Initiative (CPI) and the Global Center on Adaptation (GCA) offers a three-pronged strategy to mobilize adaptation investment in Africa and maximize its breadth and efficacy.
“Financial Innovation for Climate Adaptation in Africa” proposes:
- Mainstreaming resilience into investment decision-making by increasing access to substantial climate information on hazards and vulnerabilities; developing technical expertise in adaptation finance; capacity-building of African financial institutions and government bodies to assess and act on climate risks; supporting small and medium-sized enterprises (SMEs) that offer adaptation solutions, among others.
- Building an enabling environment to mobilize adaptation investment by developing national strategies for adaptation through investment-ready National Adaptation Plans (NAPs) and mainstreaming climate resilience in government procurement; building capacity to draft science-based policy and initiatives; improving macro-economic environments and addressing the external debt of African countries through a multi-faceted approach.
- Aggressively deploying innovative financial instruments, such as debt for climate swaps, that meet the conditions and needs of specific sectors, such as agriculture, water or urban infrastructure, after assessing key factors including currency stability, the strength of debt capital markets, and the robustness of climate information.
The report provides a detailed overview of the existing finance flows in Africa, highlighting that the continent’s most vulnerable countries have not received proportionally high volumes of adaptation finance.
“As we head to Glasgow [for COP26], climate finance stands out as the key to meeting the world’s adaptation needs. The GCA-CPI report is an invaluable financial resource to untap opportunities for urgently needed investment in adaptation in Africa, the world’s most climate-vulnerable continent. How Africa deals with increasingly devastating climate events, now and in future, is dependant on funding, and Africa cannot wait, we must act now,” said CEO of GCA, Prof. Dr. Patrick Verkooijen.
The report showcases partnership models such as the Africa-led Africa Adaptation Acceleration Program (AAAP), a joint initiative between GCA and the African Development Bank (AfDB) that aims to mobilize $25 billion for adaptation in Africa in the next five years. It also lists potential sources of adaptation finance in Africa and explores the existing barriers to investment in adaptation in the region across sectors.
“This report does not only focus on [official development assistance] ODA climate financing but looks beyond, analyzing the risk appetite of different financiers by looking at barriers to investment. It makes an in-depth analysis of key sectors and identifies existing financial models and instruments to scale up adaptation finance,” said María Tapia, GCA’s Climate Finance Program Lead and a member of the report’s Coordination Team.
Tapia, who explained that the report’s target audience ranges from financial intermediaries, investors, governments, project developers, Development Finance Institutions to international organizations, pointed out that securing financing in Africa is not an obstacle if projects are well structured and address the risk appetite of the targeted investor/financier.
“However, financiers are struggling to find adaption projects as these are not prioritized by governments,” she said.
“As there is no unique solution to increase adaptation, there is also no unique financial solution or financial instrument. To be able to reach the trillions managed by institutional investors, adaptation finance requires a combination of instruments (financial and non-financial) to make them financially sustainable to reach the risk appetite of this type of investors,” Tapia noted.
As the report points out, adaptation finance is scaling too slowly to keep up with the rising costs of climate impacts. The actions taken now to increase adaptation finance flows to Africa are critical to the continent’s capacity to respond to climate impacts and build a more resilient future.
